UNITED STATES SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 15509 / September 25, 1997
U.S. SECURITIES AND EXCHANGE COMMISSION v. DALE J. LANGE, ET AL. (United
States District Court for the Eastern District of Pennsylvania, Civil
Action No.97-CV-6018)
On September 25, 1997, the U.S. Securities and Exchange Commission
("Commission") filed a complaint in United States District Court for the
Eastern District of Pennsylvania against seven individuals for insider
trading in the securities of Cephalon, Inc. ("Cephalon"). The trading
occurred prior to a public announcement on June 10, 1995 by Cephalon
concerning favorable test results involving Myotrophin, a drug Cephalon
developed to treat individuals suffering from Amyotrophic Lateral
Sclerosis, also known as Lou Gehrig's disease.
The complaint names the following individuals as defendants: Dale J.
Lange ("Lange"), a clinical investigator for Cephalon and a member of the
medical faculty and Associate Professor of Neurology at Columbia
University's College of Physicians and Surgeons in New York City; Philip S.
Portoghese ("Portoghese"), a member of Cephalon's Scientific Advisory
Board, Stuart W. and Stephen P. Portoghese, Portoghese's sons; Frank G.
Lepore ("Frank Lepore") and Mark F. Lepore ("Mark Lepore"), officers of a
graphic arts company that was retained by Cephalon to prepare certain
materials depicting the Myotrophin test results; and Timothy L. Garner
("Garner"), a former Cephalon employee. The Commission alleges that each
of the defendants, while in possession of material non-public information
concerning the favorable Myotrophin test results, purchased, or tipped
others who purchased, Cephalon securities prior to the public announcement
of the Myotrophin results.
According to the complaint, Lange served as both a clinical
investigator and an advisor/consultant during the course of the Myotrophin
trials. Upon learning of the favorable test results, he purchased a total
of 3,000 shares of Cephalon common stock during the one-month period prior
to the company's public announcement. His profits from the trades totalled
$26,496. The complaint further alleges that P. Portoghese, a member of
Cephalon's Scientific Advisory Board ("Board"), first learned about the
positive Myotrophin results during a telephone conference call between
Cephalon officers and Board members. The Commission alleges that
Portoghese told his sons, Stuart and Stephen, about the test results, and
that they purchased 615 and 200 shares of Cephalon, respectively, within
one and one-half hours after the telephone conference call ended.
The Commission's complaint alleges that Frank and Mark Lepore obtained
the information when Cephalon retained their company to enhance certain
slides, charts and graphs, which depicted the results of the Myotrophin
clinical trials. During the ten day period prior to Cephalon's public
announcement, Frank Lepore purchased 600 shares of Cephalon common stock
and 50 Cephalon call options. During that same period, Mark Lepore, his
son, purchased 25 Cephalon call options. According to the complaint, Frank
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and Mark Lepore realized profits of $25,737 and $15,084, respectively.
Finally, the Commission alleges that Garner, who had never before purchased
securities, purchased 100 shares of Cephalon common stock and 10 Cephalon
call options prior to the public announcement. Garner was employed as a
scientist at Cephalon and worked on projects analyzing proteins used for
Myotrophin. He earned $4,656 in profits as a result of his trading.
The Commission alleges that Lange, Frank Lepore, Mark Lepore and
Garner purchased of Cephalon securities despite having signed
confidentiality agreements with the company. In these agreements, they
each acknowledged that the information they would receive from Cephalon was
confidential and proprietary. According to the complaint, in his
agreement, Lange also agreed not to purchase Cephalon securities during the
term of the agreement.
The Commission's complaint charges each of the defendants with
violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b-5 thereunder. In the complaint, the Commission also seeks disgorgement
and the imposition of civil penalties against each of the defendants.
Simultaneous with the filing of the complaint, Frank Lepore, Mark Lepore
and Garner each consented, without admitting or denying the allegations in
the complaint, to the entry of a Final Judgment and Order enjoining them
from future violations of the relevant securities laws. Frank Lepore also
agreed to disgorge his profits of $25,737, together with prejudgment
interest, and to the imposition of a civil penalty of $25,737. Mark Lepore
agreed to disgorge his profits of $15,084, together with prejudgment
interest, and to the imposition of a civil penalty of $15,084. Garner
agreed to disgorge his profits of $4,656, together with prejudgment
interest. As part of the settlement with Garner, the Commission has
declined to seek to impose a civil penalty based on Garner's demonstrated
inability to pay.
Cephalon is a Delaware corporation with headquarters in West Chester,
Pennsylvania. The company originates and develops pharmaceutical products
for the treatment of neurological disorders. Lange resides in Scarsdale,
New York. Portoghese resides in North Oaks, Minnesota, and his sons,
Stuart and Stephen, are both residents of St. Paul, Minnesota. Frank and
Mark Lepore are residents of Mt. Laurel, New Jersey and Medford, New
Jersey, respectively. Garner resides in Lancaster Pennsylvania.
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